New Landscape of the Alts Market: Selective Bull Run is Coming

The current market atmosphere is sluggish and uncertain, but we may be in the last calm period before a new round of altcoin rallies. Unlike before, the future market will be driven by core narratives such as ETFs, actual returns, and institutional adoption, rather than a broad-based bull run.

Altcoin season signals are emerging

Recently, Bitcoin has reached its highest monthly closing price in history, but its market dominance is beginning to decline. At the same time, a large amount of ETH has been absorbed, and the balance of Bitcoin on exchanges has fallen to a multi-year low. Retail investors remain cautious, with sentiment indicators at low levels, which is precisely the ideal time for early positioning.

The current altcoin speculation index is still below 20%, and the ETH/BTC pair has finally recorded its first weekly bullish candle in weeks. The approval of an altcoin ETF by a well-known exchange has become a foregone conclusion. Funds are quietly flowing towards DeFi, real assets (RWA), and re-staking among other areas.

But this will not be the kind of widespread bull run seen in 2021. Future markets will be more selective, heavily driven by narratives. Capital is flowing towards actual returns, cross-chain infrastructure, and ETF structured assets that have staking yield mechanisms.

Six Major Trends in the DeFi Sector

1. Stablecoin yield optimization and fixed income DeFi

DeFi is mimicking traditional finance by converting stablecoins into high-yield, quasi-fixed income assets to attract capital. Various protocols are focusing on capital efficiency and fixed interest rate structures to meet the needs of institutions and retail investors.

Some emerging projects like Euler Finance, Yield Nest, Size Credit, and Renzo Protocol are innovating in this field. However, it is important to note that high returns often come with risks such as leverage, re-staking lock-up, or circular strategies.

2. Integrated cross-chain liquidity and user experience

The way users interact with multi-chain liquidity is undergoing a fundamental transformation. The cross-chain experience is evolving from cumbersome bridging processes to a seamless, intent-based deposit system, effectively abstracting the boundaries between chains.

Projects like GHO, Enso, and T1 Protocol are driving this trend. Value capture is gradually shifting from L1 public chains themselves to composable infrastructure and messaging layers.

3. Re-staking and On-chain Security Market

Re-staking is evolving into an independent on-chain security market, essentially injecting re-staked ETH into structured products to build a yield mechanism similar to corporate bonds or government bonds.

Projects like Renzo Protocol, Succinct, and jito are making strides in this field. However, composability also brings vulnerabilities, such as zero-coupon bond structures that may severely damage principal due to confiscation events or validator downtime.

4. Monetization and Programmability of Data Infrastructure

Block space is no longer the bottleneck; data latency and composability are. Projects like Shelby, ZKsync's Airbender module, and Dynamic are working to address these issues.

This trend is giving rise to a new middleware business model: providing developers with low-latency, blockchain-agnostic data access services, charging on demand.

5. Institutional Credit Infrastructure and RWA Integration

On-chain lending is moving towards institutionalization, with automatic renewal of credit lines, available floating interest rates, and leveraged RWA strategies becoming the focus. Projects like Tenor Finance, Morpho, and Euler Prime are innovating in this area.

We are approaching on-chain bulk brokerage business, with compliance-ready, structured fixed-income products leading a new round of growth. However, the RWA strategy requires high-fidelity oracles and robust redemption logic.

6. Airdrop Economy and Incentive Mining

Airdrops remain the primary user acquisition strategy, but the user retention rate continues to decline. Project teams are forced to offer higher point multiples or bind additional benefits to attract users.

Projects that want long-term liquidity must turn to retention-oriented incentive mechanisms, such as veNFT locking, time-weighted reward mechanisms, or re-staking access rights, rather than relying solely on speculative points to attract new users.

Macroeconomic Narrative and Investment Framework

1. Macro background: Market fluctuations are highly linked to headlines. Every geopolitical turmoil accelerates the transfer of chips from weak holders to long-term accounts.

2. Market Outlook: Although seasonal statistics suggest that Q3 may be lackluster, stable ETF buying and the leadership of U.S. stocks may break this trend.

3. Altcoin narrative: The altcoin ETF of a well-known exchange has become the only topic with institutional-level weight. If staking rewards are included, it will shift from "high Beta L1 trading assets" to "quasi-income digital equity".

4. DeFi Fundamentals: Although Meme coins are gaining popularity, on-chain protocols with actual cash flow are quietly strengthening.

5. Meme coin: Some perpetual contracts are showing a "pump and dump" pattern, it is advised to approach with caution.

6. New Project: A large trading application has chosen Arbitrum Orbit as its L2 solution, which may boost user activity on Ethereum L2.

7. Investment Framework:

   • Core Position: Continuously Allocate BTC
   • Rotating Beta: Continue to build positions in SOL and related yield tokens below $160
   • DeFi portfolio: equal weight allocation of $SYRUP, $LQTY, $EUL, $FLUID
   • Speculative position: Limit the exposure of Meme coins to within 5% of total assets.
   • Event-driven: Focus on the milestone events of a large trading application in L2, layout related tokens in the Arbitrum ecosystem.